Avon Boosted by Fragrance and Color Sales

Posted: February 6, 2007

Avon Products, Inc. reported that fourth-quarter 2006 total revenue rose 9% year over year (6% in local currency) to $2.6 billion. Active representatives grew 5%, and units increased 2% versus the prior-year quarter. Growth in sales of beauty products in the quarter outpaced overall sales growth, at 11% in dollars and 7% in local currency. These results reflect growth in all categories, with the largest increases in the fragrance and color categories. Fourth-quarter operating profit of $282 million was 5%, or $15 million, lower than the 2005 level. Operating margin was 10.8%, versus 12.4% in the prior-year quarter.

"With 9% revenue growth in the fourth quarter, we continue to feel good about the progress we are making against our turnaround plan," said Andrea Jung, chairman and CEO, Avon. "Boosted by this strong quarterly performance, full-year revenue finished ahead of our expectations. The investments we are making in our business are clearly starting to deliver results."

The 2006 fourth-quarter operating profit was unfavorably impacted by approximately $44 million of net costs to implement the current phase of the company's ongoing restructuring program, the most significant initiative being a previously announced realignment of Avon's North American distribution network. The 2005 fourth-quarter operating profit was unfavorably impacted by approximately $56 million of costs to implement the initial phase of the company's restructuring program. The 2006 quarter also included approximately $42 million of incremental costs, related to the company's previously announced Product Line Simplification program.